Economists: China's domestic economy is slowing

Both fiscal and monetary policy have been loosened over the past few months and this should start to feed through to the real economy by the second half of this year. However, the scale of the stimulus so far has been more limited than in 2015-16, and the effect on activity is likely to be correspondingly smaller.

All of this means that, while China’s economy isn’t facing an imminent collapse, neither is it in a particularly good place. Growth in 2019 is likely to be weaker than in 2018 and this will play a significant role in the coming global slowdown. We estimate that slower growth in China will shave about 0.2%-points off world GDP growth this year compared to 2018.

Shearing also argue that the slowdown is primarily due to “domestic headwinds” – including tighter credit conditions – rather than the US trade war.

Photograph: Capital Economics

Independent economist Shaun Richards agrees:

Shaun Richards (@notayesmansecon)

Another worrying sign for the economy of China as exports fell 4.4% year on year in December and even worse imports fell 7.6% as that hints at a domestic slowdown.

He fears Donald Trump’s trade war is bringing the Chinese economy to its knees.

The Chinese trade numbers released today got all the alarm bells ringing once again.

If you ever need any evidence that how the trade spat can impact the country’s economic health then this number is clearly a major factor here. The lower export number also means that lower jobs which means another direct impact on the economy.

Donald Trump may be pleased to see these numbers because it shows that his policies have clearly brought China to its knees. Clearly, Beijing must do something to put a stop to this chaos. President Trump may actually beat his chest even more by looking at the fact that China’s trade surplus with the US is at a 10-year high.

China-US trade surplus hits record high

Despite exports slumping in December, China’s overall trade surplus with the US for 2018 swelled to $323bn — the highest on record.

Reuters has the details:

Exports to the U.S. rose 11.3% on-year in 2018, while imports from the U.S. to China rose a meagre 0.7% over the same period.

China’s overall trade surplus for 2018 was $351.76 billion, the government said. Exports in the whole of 2018 rose 9.9% from 2017 while imports grew 15.8% over the same period, official dollar-denominated data showed.

That will not please Donald Trump. It shows that his policy of imposing tariffs on Chinese goods hasn’t narrowed the lopsided trade gap.

That’s partly because the trade dispute has weakened the yuan against the US dollar, cushioning the impact of Trump’s tariffs (and making US goods less competitive in China).

“This is not just due to the trade war and tariffs. On top of those, the major drag is slowing global demand.”

Asian stock markets have fallen into the red today, with China’s Shanghai Composite Index down 0.7%. Europe is also expected to open lower, as Michael Hewson of CMC Markets explains.

This morning’s numbers showed that far from improving the trade picture deteriorated further with exports declining 4.4%, as the global economic picture became more worrying. Much more concerning for an economy supposedly rebalancing away from big industry the import data slowed as well, reflecting a sharp slowdown in internal demand sliding 7.6%, missing expectations of a 4.5% rise.

Disappointment over this mornings data has seen Asia markets slip back and will see European markets open lower this morning.

Bloomberg (@business)

Chinese trade slumped in December as trade war hit, though the picture for the whole of 2018 was rosier:-exports rose by 9.9% in 2018 in dollar terms to $2.48 trillion-imports surge 15.8%, leaving trade surplus of $351.8 billion https://t.co/2jFh8oyXkO

May makes last-ditch bid to win over Commons to Brexit deal

UK retailer Debenhams is locked in a battle for survival after its biggest shareholder, Mike Ashley of Sports Direct, forced its chairman out last week. There are fears that a rescue package could cost thousands of jobs.

Greece faces fresh political instability, after the right-wing Independent Greeks party pulled out of the country’s coalition government in a row over Greece’s naming deal with neighbouring Macedonia. Prime minister Alexis Tsipras now faces a confidence vote in parliament later this week.

That’s not what the eurozone needs, on top of its slowdown worries. New industrial production figures due this morning are likely to be poor.